Why Ford Wants Microsoft to Manage the Energy Vehicle Influx

Ford (F) and Microsoft's announcement on Wednesday that they'll use Microsoft's Hohm tool to minimize energy costs for drivers of Ford's electric vehicles—and help limit strain on the power grid for utilities—represents a big step in the development of a "smart charging" ecosystem.

But Microsoft (MSFT) and Ford say Hohm and other tools like it need to—and eventually will—offer much more than this initial step.

Nancy Gioia, Ford's director of global electrification, says the automaker is encouraging the ecosystem that will help bridge the gap between utilities, consumers, and vehicles. She called for other car companies to "jump on through the Hohm interface as well" or use a similar system.

Gioia pointed to some key reasons why Ford decided to go with Hohm. In addition to Ford and Microsoft's longstanding alliance on Sync, she said Ford liked the potential for third parties to develop phone apps on the platform. As she explained to us last year, Ford has been working to make its plug-in vehicles "as accepting as possible" when it comes to interfacing with utilities, charging infrastructure developers, and energy management software providers.

Boosting EV Adoption

Thousands of companies—many of them startups—are working on hardware and software for charging plug-in vehicles, Gioia said at the time, adding, "We have not come even close to a funnel." Hohm, with its open software architecture, is an attempt to keep the doors open for a while longer.

Gioia also commented on Wednesday that Hohm offers not only a way to help early adopters manage their battery charging but also a chance to help pave the way for the general adoption of electric vehicles. Gioia said that by using Hohm, consumers can "find out right away: How's your house wired?" and figure out what installations or rewiring they might need to accommodate an electric car. When you log into the Hohm site, you can "immediately start to engage your home," she said.

At the same time, Microsoft is looking for a wide range of partnerships in this space. Says company spokesperson Marja Koopmans: "It's critical for a healthy energy ecosystem to collaborate broadly." That means working with utilities and municipalities—and also with multiple automakers.

The energy industry is a strategic business area for Microsoft, which has in the past told us it plans to charge utilities for services eventually. Koopmans told us that while consumers will have ownership of their energy data, Microsoft will aggregate data from Hohm customers and use that data to refine and update its algorithm. So more EV drivers means more data, and potentially more value for utilities.

Needed: Utility Communication

Microsoft is already in talks with other car companies. (Not surprisingly, Koopmans declined to name specifics.) But it's not clear whether other automakers will soon take the same route as Ford—bringing in a very visible partner to facilitate smart charging and serve as a middleman between electric car drivers and utilities.

When we asked General Motors (GM) whether the company has looked at using Hohm, Britta Gross, manager for energy and environment infrastructure commercialization at GM, pointed to challenges for a one-size-fits-all smart-charging system. She commented in an e-mail that the U.S. has 3,000 utilities and no set standard for them to communicate across the grid. A standardized communication protocol needs to be developed, she said, before anyone can really "tell when there's an off-peak energy time."

In the meantime, Gross said a smartphone app will give buyers of the upcoming Chevy Volt the option to program their vehicle remotely to start charging at a later time, when energy demand (and rates) might be lower. But the company's app, unveiled in January, doesn't actually gauge real-time electricity pricing or demand.

Rather, similar to the app concept that Nissan (NSANY) has developed for its upcoming LEAF, GM's application will allow Volt owners to control certain vehicle functions through GM's OnStar system and their BlackBerry Storm, Droid, or iPhone. They can, for example, schedule battery charge times; see whether or not the vehicle is plugged in; check voltage at a charger; get text notifications of interruption or completion of a battery charge; and turn on climate control. According to Gross, GM is looking at ways to use OnStar to provide additional options for programming when the battery will start drawing juice from the grid.

Plug-In Power Drain

Ford CEO Alan Mulally said Wednesday that an electric vehicle could double a typical home's energy consumption. Put another way, Koopmans said, when you buy an electric vehicle, it "becomes the single largest consumer of energy in the home." So in areas where plug-in cars will roll out in significant numbers, connecting with vehicles will be all but required for a player to be relevant in the world of home energy management.

Koopmans declined to say how much data Microsoft expects to collect from EV drivers or how large a portion of the total data pool for Hohm in coming years is likely to stem from today's deal with Ford. "That will grow over time," she said. "We will learn how quickly we can move on this."

For more on connected cars, come to our Green:Net conference on Apr. 29 in San Francisco, where our panel on the new networked car will include Paul Pebbles, OnStar Chevy Volt service line manager, General Motors; Mark Perry, director of product planning, Nissan; Ed Pleet, product and business development manager, connected services, Ford; Saul Zambrano, director, integrated demand-side management core products, PG&E; and Hugh McDermott, vice-president, global utility alliances, Better Place.

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